Nana Boakye Asafu Adjaye, Acting Chief Executive, Ghana National Petroleum Corporation (GNPC)
Edited transcript
David’s Introduction: He says there is a bright future for Ghana, as long as Ghana optimally develops its oil and gas resources. He says the revenue from oil and gas, can transform the country. My guest is the Acting Chief Executive of the Ghana National Petroleum Corporation, the lead agency in the oil and gas sector.
David: What is your view on the way things are unfolding currently ?
Are you happy with the pace?
Will there be oil by the last quarter 2010?
Nana Asafu Adjaye: Well, I am very happy with the way things are going. Indeed, there will be oil and gas in the last quarter of 2010, and we will be producing 120,000 barrels of oil per day, and 120 million cubic feet of gas also per day. We are actually on track to achieving these.
As you are aware, sometime in the middle of July, the development plan and Unit Operating Agreement were approved. This was signed by all the parties involved. The Minister for Energy approved the development plan so we are indeed on track.
There are a number of things that are currently ongoing, such as the construction of the Floating Production, Storage and Offloading (FPSO) facility, in Singapore. There are other things going on concurrently. The FPSO
is the tanker that stores all the produced oil and gas. Some amount of processing is also done on board the FPSO. When it is full, a shuttle tanker collects the oil, for delivery onto the market. That is the main purpose of the FPSO.
David: What is GNPC going to be doing between now and 2010 when first oil is expected?
Nana Asafu Adjaye: Well, we are a partner in this consortium, and we had an initial 10% carried interest. On discovery of the oil, we acquired an additional participation. . So as we sit today, GNPC has a total interest of 13.75%.
As partners we have various rights: we are involved in the Unit Operating Agreement; we are a signatory to that. It is this agreement that really governs the relationship between the partners. We sit in all the operating committee meetings, and that is where approvals for work projects and budgets are undertaken. We review them and make the necessary changes that need to be made, and also give approvals to some of the things that have been accepted.
David: Is GNPC also the industry regulator?
Nana Asafu Adjaye: GNPC is not a regulator. The Petroleum Law (PNDC law 84) spells out clearly the various roles. It is the Ministry of Energy that plays the role of regulator.
Some people mistakenly see GNPC as the regulator. The reason behind this misconception is that the Ministry frequently uses capacity within various government institutions. These include personnel from GNPC, the Attorney-General’s Department, and Internal Revenue Service. I don’t see anything wrong with the Ministry Of Energy using the capacity within these government institutions, including GNPC. The capacity of GNPC is used to perform the regulatory role of the Ministry. However, by law, the regulatory function lies with the Ministry for Energy.
David: So in practice, GNPC plays the role of regulator.
Nana Asafu Adjaye: If the Ministry of Energy does not have all the personnel that it needs to effectively and efficiently perform, then it can rely on the capacity within the system.
Basically, what we have to ask ourselves is: what is the country’s objective? The oil companies must operate within a certain framework; there must be regulations; somebody has to ensure that these regulations are applied so the companies work within those rules and regulations. The objective is to protect the national interest so that there is a fair playing field. So if the Ministry uses personnel in its various state institutions to perform that role, I don’t see any wrong with it.
David: What do you mean when you say “to protect the national interest”?
Nana Asafu Adjaye: The oil companies should be made to operate according to industry rules and regulations, and that is protecting the national interest because we have a stake in this whole industry. The oil companies have their own ways and means of protecting their interests, and likewise, we should protect our national interest.
Like I stated earlier, GNPC has a 13.75% interest in the asset, government has a royalty of 5%. At the same time, there are taxes to be imposed.
What happens also is that there are reporting procedures which enjoins the players within the industry to submit quarterly reports, annually reports, etc. These reports must be reviewed, and we need to ensure that things are done properly, and that costs are being monitored properly.
When we talk about 35% Income Tax, we can only tax profit, so if the costs are high, the profit is small. We have to ensure that the costs that we are seeing on paper are genuine.
That’s just one example. Environmentally for example, we need to ensure that things are done properly, and that there is preventive action, so that the environment is not unduly disturbed by the activities of the oil companies.
Kosmos, Tullow, Anadarko, GNPC, Sabre Oil and Gas , and the E.O. Group are all part of the consortium. These hold various interests. Actually, the Jubilee Oilfields straddles two blocks; the West Cape Three Points Deep-Water-Block, and the Tano Deep-Water-Block. What happened was that the discovery was unitized because the discovery straddled these two blocks. The blocks are for different players, but the resources goes into both blocks since Geology knows no boundaries.
The operator at the Tano Deep Water Block is Tullow Oil, and the partners in there are Kosmos, Anadarko, Sabre Oil, and GNPC. In the West Cape Three Point, Kosmos is the operator, and the partners are Tullow, Anadarko and GNPC. GNPC is in both blocks, carrying 10% interest.
David: Do you have good partners?
Nana Asafu Adjaye: We have very good partners, and we have a very good working relationship. Of course there are some challenges. Even in marriage among husbands and wives, there are challenges. So far as we are engaged in a very constructive manner, we are moving on, and work is going on normally. We are able to overcome some of the normal challenges that would crop up in a relationship.
David: But it is one thing to discover and go through a plan of development, and it must be another thing to produce oil . Are these partners able to deliver? Unlike the Exxon Mobil’s of this industry, these partners are not large companies. Is that a shortcoming or a strength?
Nana Asafu Adjaye: Well, these are independent companies, and I’ll call Tullow a major independent company.
You are aware that there are indications that Kosmos wants to exit. This may be understandable since their business model is that of an exploration company; they look for good exploration places, they go after them, make discoveries, and then exit when the time is right. In Ghana, they are backed by Black Stone who are a private equity firm, and who normally are in it for the short haul so there is no problem at all with Kosmos leaving if they choose to. If they want to stay, they are welcome, and we’ll work with them. However, if they are leaving, we just want to ensure that the right partner comes in to join the consortium so that we can have added value to the work that is ongoing.
We want to ensure that the resource that is out there is optimally developed, and we are talking about a world-class discovery that is down there. We haven’t seen it yet, but it must be developed. The amount of oil we have in the ground is not all going to be extracted. They will be able to extract a certain percentage that is there. For this kind of reservoir, we might be able to extract anywhere between 40% to 45%. This is however possible only if the development plan is followed, and the field is optimally developed. If that is not done, instead of recovering 40%, you might end up recovering only between 20% or 15%; and when you don’t recover that much, you are losing a lot of value. That is what I mean by having the right partners, and ensuring that the field is optimally developed so that we can recover all that is capable of being recovered.
David: what is happening now?
Nana Asafu Adjaye: In fact, that is what is happening now, and the wells are being drilled and developed as we speak . There are supposed to be 17 development wells, with 9 producing wells, 5 water injectors (because the water is pumped down the reservoir to maintain the reservoir pressure which is one of the ways to optimally recover the oil and gas that is down there).
David: How significant are Ghana’s oil discoveries ?
Nana Asafu Adjaye: This particular discovery is prolific. It is indeed a giant field. In 2007, it was the largest single oilfield discovered in the whole world. The important thing about this is that it opened up what we call the New Petroleum Province in Ghana and in our offshore areas. The petroleum province is at the Cote d’Ivoire-Tano Basin, where we have the Tano and Cape Three Point Sub basins.
After the discovery of the Jubilee field, a number of other discoveries were made. For example, there has been the Odum discovery made my Kosmos, then the Tweneboa discovery, the Mahogany Deep discovery, and all these discoveries are completely separate from the Jubilee Field. The discoveries are now going to be appraised, and then go through the process of getting a development plan approved, after which process full development would begin.
There is also the Mahogany Deep which hasn’t been appraised yet. In fact, recently Vittol also made a discovery; they drilled their exploratory well and discovered gas with a thin column of oil underneath it. That too will eventually be appraised.
David: GNPC has been around for a while. I even recall going down to some of its rigs back in the mid 90s in the Tano field
Nana Asafu Adjaye: That must have been the South Tano Field. We were doing a production test then. That field was in relatively shallow waters. That field was discovered by Philips Petroleum. There was a certain amount of oil and gas over there which could be developed, and so we embarked on an appraisal program. We drilled that well using the horizontal well technology. That was an example of a well that was drilled and operated by GNPC. After that we put the well into what we call Extended Production Testing for about 6 months. We produced the well for some time and we shut it down . That was what was happening way back then, and that is what I presume you saw.
David: Tell us a bit more about where GNPC has come from?
Nana Asafu Adjaye: One of the most important aspects of GNPC has been its personnel. The human resource base of the organization is simply fantastic. These are qualified young guys who are very determined and very passionate about what they do, and they’ve been focused from the time of setting up GNPC.
The genesis of GNPC was when there was a study in the early 1980s, which was to determine strategies for accelerating the pace of petroleum exploration and production in the country. Out of that study, a number of recommendations were made to restructure the petroleum sector. Shortly afterwards, GNPC was started with a few young guys.
The model and vision we had was for GNPC to become an integrated oil and gas company. We were looking at institutions like Petrobras in Brazil, which for us had done great things. Through United Nations funding, we got personnel from Petrobras who came to act as consultants and helped with the building of the institution, with the necessary systems and processes in place. There were also training programmes in various fields. Many specialists within GNPC, such as Petroleum Geologists, Exploration Geo-Physicists, Economists, Lawyers, among so many other professionals, were all sent out to do masters degrees and other advanced programs in various universities all over the world.
David: So what are they all doing? Are they still within the GNPC the system?
Nana Asafu Adjaye: Well some of them are still in the system; others have left, while others are working in such far-flung places such as Mongolia, and in many other different places.
David: When one considers the demands on Ghana now, you must be under pressure because there is so much interest and yet, there are so few of you to do the job.
Nana Asafu Adjaye: Yes, there is so much interest and there is a lot of challenge ahead of us. But really, we are embarking on a recruitment exercise. We are looking at the structure of the organization, and I am working on that so that the organization is able to face the challenges ahead of us.
We also need to look at the personnel across-board, and I’m sure you are aware that GNPC is going to be lifting crude oil from Nigeria, further to the understanding between our Head of State and his Nigerian counterpart. Therefore, our marketing division is being re-established, and we are currently interviewing people who are going to join that department.
David: What is the strategic vision of GNPC?
Nana Asafu Adjaye: I want to build GNPC into a world-class integrated oil and gas company, comparable to the likes of Petrobras. A world-class oil and gas company is the way to go.
David: So its about ownership too?
Nana Asafu Adjaye: Eventually, GNPC could go private so that we can have the flexibility to do the kinds of things we need to do. Going out there and operating as a commercial entity is the vision we want to get to.
David: What are you going to do in order to guarantee that this oil find becomes a blessing in our case?
Nana Asafu Adjaye: Ghana is a democratic country with a vibrant media which will ensure transparency in our operations. We are going to be transparent in the way we do things also. For example, when petroleum agreements are executed, or when an application comes in, there is a standing committee which examines the application before it goes to GNPC Board for approval. Thereafter, it goes to the Minster for Energy for review, then to cabinet, and then the Parliamentary Sub-committee on Energy. So there is transparency all along the chain, and that is how we are going to do things.
David: Is that the case with how blocks are allocated? Also, h ow did you decide on who builds the FPSO? Is all that transparent?
Nana Asafu Adjaye: That is all transparent. It’s an open bidding process, that is how all that is done.
David: Some people argue that we should stop assigning more blocks, and rather focus on getting better at what we are doing currently, so that we can maximize returns going forward. Is that a good idea ?
Nana Asafu Adjaye: That’s not necessary. We just have to ensure that things are done properly; that the necessary regulations put in place, and that players are made to follow laid-down procedures.
David: Is there a huge risk to our environment?
Nana Asafu Adjaye: Well, the Environmental Protection Agency is doing a good job of that. We at GNPC liaise with them very effectively. Before any major work is done by any of the players in the oil and gas sector, an application is sent to the EPA for the necessary permit to be issued. Certain standards and targets must be met before a permit is issued. For example, where seismic data are required, a company is required to first submit an application to the EPA for drilling wells.
David: Is there a local content policy?
Nana Asafu Adjaye: The policy is being developed. However, in the absence of that there is a provision in the Petroleum Agreement where Ghanaian goods and services are supposed to be used. The GNPC as much as possible tries to enforce this provision. That is the reason why all Oilfields Service Companies who are going to operate in Ghana register with GNPC. When they come to register, we tell them to partner with a Ghanaian entity.
There are some companies who come with Ghanaian partners. The other way of doing that is through training programs. We are working with a number of institutions such as the University of Calgary and University of North Alberta, as part of capacity-building.
David: Is there not an arrangement for foreign companies to train Ghanaians?
Nana Asafu Adjaye: Exactly! There are specific provisions in the agreement for that also to be done. We collaborate with them on that. Monies are allocated for training. Some of the training programmes are done through GNPC. As a matter of fact, some of the training that GNPC personnel go through is actually funded this way.
With respect to the local content policy, we are engaged in talks with some of the oil companies to provide the necessary financing for some of that. There are two universities in Canada with whom we are collaborating, together with Takoradi Polytechnic, Ho Polytechnic and Cape Coast Polytechnic, all for transferring skills.
We need people to be capable of understanding and working in the industry. For example, people on the FPSO after some time should be in a position to set up their own companies, or even partner with some of these Oilfields Service Companies.
David: This industry must be poised to make a significant contribution to this country’s economy?
Nana Asafu Adjaye: We believe so, and we are confident that that will happen. We want to ensure that the work that we do at the end of the day will have a profound impact positively on the quality of life of the average Ghanaian. We believe that through the revenue that we accrue from these oil resources, we will have good education, improved health care, reduction in poverty, and good infrastructure. That is what I look forward to.
David: Thank very much for coming.First Broadcast 22nd August 2009, TV3 Ghana
